Munis Improving, Still Hamstrung By Rising Interest Rates

By Michael Aneiro

The muni market has been waiting for nearly six months for some return to normalcy, where performance is tied to state and local finances instead of just underlying moves in interest rates. That moment hasn’t arrived yet, but things at least look like they’re getting a little better lately, according to Morgan Stanley Wealth Management:

Although the summer’s constructive technical backdrop seems to have finally arrived, the resulting muni outperformance was overshadowed by rising interest rates in the broader US Treasury market….

Though delayed by over a month, the summer’s constructive technical backdrop should endure over the coming weeks. Accordingly, next week’s [new muni-bond issuance] calendar is notably light (approximately $3-$5 billion); this development comes as little surprise as August holds the fifth lowest monthly average for issuance since 2000….